Lapasar
Spend & Cost Management

Purchase Price Variance (PPV)

Also known as: PPV

Purchase price variance (PPV) is the difference between the price actually paid for an item and its expected or standard price.

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PPV is calculated as the actual price minus the standard or budgeted price, multiplied by the quantity purchased. A favourable variance means buying below the standard price; an unfavourable one means paying more. It is a core metric for measuring procurement's price performance and the reliability of budgeting assumptions.

Analysing PPV over time highlights where prices are drifting, where negotiations are delivering and where maverick or off-contract buying is costing money. It works best alongside context — a favourable PPV achieved by sacrificing quality or reliability is not a real win — so it is read together with total cost of ownership and supplier performance.

Frequently asked questions

What is purchase price variance?
Purchase price variance (PPV) is the difference between the price actually paid for an item and its expected or standard price, multiplied by quantity, used to measure procurement's price performance.
What is a favourable purchase price variance?
A favourable PPV occurs when the actual price paid is below the standard or budgeted price. An unfavourable PPV means paying more than expected.

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